Calculate Your Hourly Rate

How Much is Your Service Worth?


Would you charge the same rate for a project that is difficult and needs to be done tomorrow vs. a project that is simple and delivers next week?

I hope not!

You see, if we establish a fixed rate for ourselves, we limit our income, we undercharge for complex projects and overcharge for simple projects.

In the next paragraphs we're going to establish your rate "range", that is the minimum to the maximum you charge for your work depending on the project, client and other factors:

  1. Unit of Measurement, the Hour
  2. Base Rate ✏️
  3. Market Rate ✏️ + 💡
  4. Testing the Waters
  5. Factors  ✏️
  6. Your Main Rate  ✏️+ 💰

1. Unit of Measurement, the Hour


An easy way to charge for your creative services is based on time worked. This works well If you’re providing a commodity / creative service that is based on the amount of time you spent doing the work, which is typical for motion designers and video editors, for example.

We’re going to calculate our hourly rate because as it turns out, it’s an easy unit of measurement to know how much time it takes to get something done.

It’s also scalable: allowing you to charge for small changes up to large projects, and I’m assuming that anything worth your time at least takes an hour to complete.

It is more common to charge a day or even weekly rate because the creative process often takes time. And you, therefore, don’t have to outline what you did every hour of the day. But how much do you charge for your day or weekly rate? You can find out that answer simply based on your hourly rate. 

  • Day rate is hourly rate x 8
  • Week rate is hourly rate x 8 x 5

Another common price structure is a “project rate”, which ensures the project gets completed for a fixed price.

You can also base the project rate on the number of hours you estimate it will take. This is why it’s so important to be able to accurately estimate the hours you’ll need to complete your intended work. (More on that in the section “Project Time Management”. This lecture features videos where I take you through how I estimate projects step by step)

In the next paragraphs, we’ll start to define some boundaries that will help you build a “main hourly rate” that you feel good about. 


2. Base Rate 💰


Instead of looking elsewhere what we should charge, let’s first establish a base rate. Take a look at your expenses (e.g., rent, utilities, food), (All things I cover in the first Calculate Freelance Cost lecture) and check to see if you make enough to cover those expenses and save a bit on top, then you should feel good about charging that rate and never go below that. 

Even if you find out later that you could have charged more, you at least were able to cover your financial needs.

✏️ Calculate Your Base Rate

Do some number crunching and find your own base rate.

Example based on the USA:

You might need $50,000 per year for a single person’s living expenses + a little saving / paying off debt.

* Also, consider the amount of taxes that will be taken out of your income as a freelancer. This is often hidden when we work full-time because it’s customary that the taxes are automatically deducted before you get paid.

E.g. $50,000 / 50 work weeks = $1000 per week / 40 hours = $25 per hour

The chance we’ll be working full time as a freelancer, however, is low and some jobs pay more than others, so I’d say double that rate just to be safe. ($50 per hour)


3. Market Rate 💰


As you’re already probably aware, our current economy is based on scarcity and demand. To define your market rate, you have to understand what “market value” your service has. 

  • Scarcity. How unique is your service and what would it cost to get what you offer anywhere else? 

  • Demand. What would people be prepared to pay for your work at this moment in time?

The more scarce/unique your skills are and the more responsibility and risk you take, the more your work is going to be worth; and the more in demand your service is, the more you can charge. (Read more about this in the "How to Find Clients" lecture)

Not sure what the market rates are? It's best to ask people you know well that work around you what they charge for their work so you have something to compare yourself to. 


It's easy to just go with what everyone else does but really evaluate your own situation before going with the crowd.

💡Quick Tip!


Quickly calculate rates from hour to weekly to yearly:
(Based on: 8 hours per day, 5 work days per week and 50 work weeks per year. K = a thousand)

• $100K yearly: Ignoring the “K” divide by 2 = Hourly rate of $50
• $100K yearly: Ignoring the “K” multiply by 4 = Day rate of $400
• $100K yearly: Ignoring the “K” multiply by 2 and add a 0 = Weekly rate of $2000

 ✏️ Find the Market Rate Range

Get a rough idea what the minimum and the maximum market rate is for what you do. 

Example based on the USA:

(The following numbers are meant to be examples ONLY. These can change over time and can be very different based on the city/country you work in. If you just copy these numbers or consider them as truth, you’re not doing your own research. I want you to be able to build your own rate based on your understanding of the value you provide not copy it from somewhere else.)

  • AIGA salary survey shows $60K as annual full-time rate.
  • Coroflot shows a range of $51K to $84K as an annual rate for the NY state. 
  • School of Motion’s industry survey shows between $65K and all the way up to $320K for freelance rates.
  • Mixed Parts and other blogs say:
    Low end $400 a day (divide by 4 and adding the K gives us $100K)
    High end $1,100 a day (divide by 4 and adding the K gives us $274K)

Once we map those out on a scale, it looks something like this:


(The salary surveys like AIGA and Coroflot probably show more full-time position rates and School of Motion and Mixed Parts is probably more freelancers rates.)


✏️ Place Yourself on the Map  

Now it’s up to you to put yourself on this range somewhere. What range do you feel your skills fall within based on your experience? 

If you’re just starting out, then you’re probably closer to the minimum range. Alternatively, if you’ve been working successfully for a while and have a good set of skills, you’re probably near the top or even past the top end of the range.

Example based on the USA:

So say we worked full time for a while so we have a lot of experience. You might want to pick a number somewhere in the middle of the freelance ranges.

That would mean our annual rate is about $190,000 (95hr) 

Again, this might be way off, is just an example showing how you could approach the math for finding your market rate. You have to verify these for yourself and find more ranges depending on the current date, the area of expertise and country you live. Take them broadly. For instance, an annual salary estimate like $320K might be calculated by (ignoring the “K”) and dividing by 2, which results in $160 per hour. This does not automatically mean that a freelancer would work that many hours in the year though. )


4. Testing the Waters


If you’re in the fortunate position of not needing work at the current moment, or there is a client that you’re not interested in working for, but they ask for your rates, then you can “fish” to see as to whether they would “bite” at a higher rate.

  • If a reputable client agrees quickly with no problem, your rate was probably on the low end. 

  • If they tell you it’s a little above budget, you’re probably spot on. 

  • If they tell you it’s still too high after you’ve lowered it, you’ve probably priced yourself out of the market for that particular service...

Example:

After I just finished up a couple projects and felt financially stable, I got one interesting project that would start the next day for two days. I didn’t really feel the need to take it on because it wasn’t an ideal client, nor did I need the money.

I quoted them a rate that was 30% higher than the highest rate that I’ve ever charged and sent it out with full confidence. 
I can’t lose in this situation. If they take it, I get a nice bonus that will allow me to be financially stable for longer and would allow me to work on future projects I care about. 

If they didn’t take it, I’d just continue on doing what I was planning to do anyways. 

The client ended up saying “yes” because they were in a tight spot timewise. And this brings me to the next paragraph.


5. Factors


There are other factors besides the work that can influence your rate. My rate is changeable based on all these factors, which is why you should consider not having a fixed hourly rate. 

  • What role do you play? Are you the carpenter — coming in to do a piece of creative work — or are you the architect — managing a team and communicating heavily with the client? Knowing this will allow you to adjust your rate accordingly. 

  • Your skill level. How well do you perform creatively, deliver in a timely fashion, and are you easy to get along with? (We talked about improving this in the Freelance Foundation course). If you feel like you do well at all of these things, then I would argue that you can charge more!

  • Speed. How quickly do you work? Although this may be hard to convey to the client, speed and adeptness at getting a project done might come in handy at any time, specifically if the client is up against a tight deadline.

  • Type of client. As you’ve probably assumed, larger companies are able to (and often expect to) pay much higher prices than a small brand, start-up or non-profit. This higher price is often reflected, not only because they make more money, but also because there is more risk involved because of the brand’s image.

  • Timeframe. Does what you’re delivering have to be done by tomorrow? Over the weekend? Or over the holidays? These are instances where you can charge extra. If there is less time to finish the project, then it should be more expensive, as there is more pressure to get it done on time. 

  • Where are you and your client located? If you live in the middle of a big city, you might need to charge more because your living costs are likely higher. Alternatively, if your client is in a big city, they’re probably accustomed to paying higher rates. So you could potentially adjust your own rate based on where you live. This is very beneficial if you live in a really cheap area but your clients are all in the big city.

✏️ Define Your Factors 

What factors would alter your rate?

Example based on the USA:

It’s all up to what you find reasonable to charge. Let’s say a client emails us on Thursday and they need help with a pitch on the weekend. I’d say charge between 25% to 50% extra as a rush fee or because it’s on the weekend. However, this all depends on you and what you’re ok with.

6. Your Main Hourly Rate 💰


Now that you know your base rate, market rate, have tested the waters and know what factors affect your rate, you should have a good sense of a reasonable rate range for the services you offer. 

✏️ Define your Main Rate

Your main rate is on the higher side of that range. 

It’s also good to confirm this and get hired at that rate.

For our example that means:

• Base Rate = $50 per hour * Double the min to be safe
• Market Rate = $95 per hour
• Fish “Testing the Waters” Rate = $110 per hour


In this example, your main rate could be $100 per hour, but you can come down all the way to $50 per hour depending on the client, or even go up a little bit based on the factors we discussed.

Conclusion


In the next lecture, we take a look at how you can charge based on the value that your work provides.

Also get familiar with the quick math tricks so if you hear someone is making $200K a year, you know that means roughly a $100 per hour.

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